As Treasury yields continue to rise, the Dow Jones futures, S&P 500 futures, and Nasdaq futures all made a minor downward swing on Wednesday morning. In this article we will discuss how Stocks fall on call for largest Fed rate increase in 40 years; Apple, Tesla fall. A hotter-than-expected inflation report sent the stock market surge tumbling Tuesday, as the major indexes broke below their 50-day moving averages, wiping away all or nearly all of their recent gains.
The consumer price index for August was far worse than predicted. Contrary to expectations, consumer prices increased by 0.1%, driven up by rising rents and food costs despite falling gas prices. In contrast to expectations, the core CPI, which excludes food and energy, increased by 0.6%. Although headline inflation slightly decreased once more, to 8.3%, Wall Street had anticipated 8%. To 6.3%, core inflation increased more than anticipated.
The Federal Reserve is expected to raise rates by a full percentage point at its meeting on September 20–21 as a result, according to one Wall Street firm. That would be the highest since the early 1980s, when Paul Volcker, who was then the head of the Fed, declared all-out war on inflation.
Dow Jones Futures
Dow Jones futures decreased today by 0.15% compared to fair value. Nasdaq 100 futures dropped a small amount, while S&P 500 futures fell by 0.1%. Even though futures were slightly higher earlier in the day, they still only contributed slightly to Tuesday’s market losses.A just 4 basis points away from 11-year highs of 3.48%, the 10-year Treasury yield increased to 3.46%.
Prices for crude oil dipped a bit. Over 1% extra was paid for natural gas in the US.The Labor Department will publish the August producer price index at 8:30 a.m. ET.
Keep in mind that overnight trade in Dow futures and other markets may not necessarily reflect real trading during the following normal stock market session.
Bullish Stock Market
With the major indices ending at session lows with the hot inflation report and Fed rate hike fears, the stock market rally experienced its worst loss of 2022.
Another element? According to Reuters, the United States is considering alternatives for broad sanctions against China in order to stop any invasion of Taiwan. There is pressure on the European Union to follow suit. The likelihood of a significant economic separation between China and the West would increase as a result.
In Tuesday’s stock market trade, the Dow Jones Industrial Average fell 3.9%. S&P 500 index fell by 4.3%. Nasdaq’s composite index fell 5.2%. The Russell 2000 small-cap index dropped 3.9%.
Both the stock prices of Nvidia and Meta dropped more than 9%, falling below their 2022 lows.
Prices for U.S. crude oil dropped 0.5% to $87.31 a barrel.
A 6 basis point increase brought the 10-year Treasury yield to 3.42%. A little behind the 11-year high of 3.48% reached on June 14, the benchmark yield reached 3.45% intraday. Short-term yields increased significantly more.
On Tuesday, PSTG stock dropped 3.8% to settle at 29.64, but it closed above its 21-day line. With a 31.62 buy target, Pure Storage stock is trading on a cup-and-handle foundation. A move over Monday’s high of 30.88 can be used by investors as a somewhat cheaper entry.
Nio Inc Cl A Ads (NIO)
After surging 13.5% on Monday, Nio stock increased 0.9% to reach 21.95, touching its 200-day line intraday. Over the past five days, four of which saw high activity, the shares of the Chinese EV company have risen 28%. Analysts are becoming more positive about Nio’s lineup. On September 30, Nio will start shipping the ET5 car, the company’s third new EV this year. Investors could benefit from a strong move above the 200-day line if Nio stock moves decisively above its 24.53 bottoming base purchase target.
Wolfspeed Inc (WOLF)
After falling to 111.26 shortly after the opening, WOLF stock dropped 2.5% on Tuesday to close at 113.98. Announcing the chipmaker with an outperform, Evercore ISI claimed that it was an excellent method to enter the EV market. Investors may view the recent movement as a handle to a significant consolidation with a buy point around 123.35. An early entry could be provided by a rise over Monday’s high, although Wolfspeed stock is stretched and has significantly outperformed some of its moving averages.
Apple shares fell 5.9%, giving up the gains from the previous two days and falling back below its 50-day and 200-day lines in high volume. On Monday, AAPL stock had broken out of a downtrend in a handle, providing an early entrance, but that opportunity is no longer available. The Dow Jones IT giant’s stock is moving toward a 176.25 buy target from that handle.
The price of Tesla shares fell 4% to 292.13, skidding back down to its 200-day line while retaining its 21-day and comfortably above its 50-day lines. Despite being low, volume was higher than during the five-day rally.
With a 314.74 buy price, the TSLA stock may have a brief base within a bigger consolidation. A rise above the high of 305.49 on Monday might provide an early entry.
Martin Viecha, director of investor relations at Tesla, stated at a conference on Tuesday that EV supply-chain costs and restrictions are loosening, which should result in cheaper prices. Viecha predicted that Tesla would ultimately provide a less expensive EV model, although she did not specify when. Tesla recently debuted a significantly less expensive lower-range Model Y in Europe.
Analysis of market
On Tuesday, the recently resurrected stock market boom collided with the CPI inflation buzzsaw. All of the main indices as well as the Russell 2000 lost ground to their 50-day moving averages. While the S&P 500 came close, the Dow Jones broke through last week’s lows. The majority of the gains from the previous four sessions were lost on the Nasdaq.
Leading stocks dropped on Tuesday as well, despite several of them making significant gains recently. Following recent days of strong market breadth, losers dominated winners.
The Apple shares had negative trading Tuesday. Following some low-volume increases, Tesla also declined, but its chart appears a little better.
The chances are that Pure Storage and Nio stock will falter if the market continues to experience further pressure.
Expectations of a mild inflation report had helped boost the stock market over the previous few days, in large part. The Fed would then start raising rates more gradually as a result.
Stocks aren’t likely to fare well if the Fed becomes more assertive, Treasury yields increase, and the dollar gets stronger. This is particularly true when markets were predicting the reverse.
What comes next for the market is the question at hand. Will the major indices go below their lows from last week and move closer to the June bottom? As Wall Street waits for concrete evidence that the Fed will stop raising interest rates, it’s feasible that the market will remain rangebound.
Given the low-volume advance that factored in positive news before to Tuesday’s CPI inflation announcement, investors might have decided to grab profits. You could want to lock in any residual gains from recent purchases at this point or reduce losses.
Maintaining a light exposure is a smart idea. The market’s trajectory is now unknown as a result of the strong inflation data undermining the short-term bull case for further gradual Fed rate hikes.
The market will at some point be clearly in an upswing, whether that time is next week, next month, or next year. The actual money will be made at that time.